Social impacts: Include forced displacement of more than 1000 Ngobe indigenous people and harm to livelihoods of 4000 more. Because of the dam the Ngobe have suffered beatings, arbitrary detention, public humiliation, threats and illegal destruction of crops and homes at the hands of the police and AES.

Environmental impacts: Destruction of riverine and forest ecosystems in one of the world’s biodiversity hotspots. The dam is expected to have severely negative impacts on fish and shrimp biodiversity by blocking migrations between the San San Wetlands Ramsar site and the UNESCO World Heritage Site La Amistad International Park (shared with Costa Rica).

Status: Under construction. Land clearing started 2005. Subject to numerous ongoing court cases, repression of local communities, and criticism from United Nations Special Rapporteur on human rights and indigenous people.

Additionality Status: Non-additional in terms of how CDM “additionality” is normally understood (i.e. that the prospect of CDM registration was necessary for the project to go forward). However the project could be considered as a case of a new form of additionality: “greenwash additionality.” Validation by TÜV-SUD and registration by the CDM could harm local community and environmentalist efforts to stop the project and protect local communities by providing apparent UN support for the project.

Quality of PDD: PDD contains numerous fraudulent claims, in particularon project additionality and the strong opposition from local indigenous communities. No mention is made of the intimidation and other repressive tactics used against local communities, the legal irregularities in the project approval process, or the numerous legal challenges against the project.

Impact of validating the project: Vindication of repression against local communities and fraud in CDM documents. Could set back legal and political campaigns to stop the project.

“Investment Barrier”
AES announced that they would build the dam on the basis of a 10-year power purchase agreement with utility, Union Fenosa, at a meeting with Panama’s President Martin Torrijos on January 26, 2006. Full-scale construction started in 2007. Andres Gluski, president of AES Latin America, told President Torrijos that the dam would “provide a . . . low cost source of electricity for Panama.”

It is inconceivable that AES would have entered a legal contract to supply electricity and committed a $320 million investment if this would only be economically viable if at some point in the future the dam would be issued credits by the CDM. This is especially true given AES experience of its application to the CDM for the Bayano Hydro Expansion Project in Panama. This application was first made in 2001 and is still waiting for validation. (The Bayano Expansion has long since been completed regardless of its not receiving CER income). AES also unsuccessfully tried to get CDM registration for its Bujagali dam in Uganda in 2002. (Although AES is no longer involved the dam is now under construction despite not receiving CER income).

The PDD claims that the Minutes from an AES Board of Directors meeting in October 2006 “demonstrates that the incentive to develop the project activity as a CDM [sic] was considered and played an important role in the decision to go ahead with the project.” This is irrelevant in terms of proving additionality. To be additional the CDM must essential to the decision to develop the project, not just an “important” factor which was “considered.” Given that AES is well aware of CDM rules, and stands to gain revenues of around $70m (@$15/CER) overseven years if they get CDM registration, it would indeed be surprising if their board did not consider how much they would like to get CDM registration. It would even be somewhat surprising if the $70m was not a sufficient inducement for the board to say that the CDM was essential for the project to go ahead regardless of the reality. The CDM process is predicated upon independent evaluation of developer claims, not just taking developers at their word. In any case confidential minutes should not be eligible to be used in CDM validation processes which must be open to public scrutiny.

“Prevailing Practice Barrier”
AES makes the absurd claim that “under a business as usual scenario hydroelectric technology would not be implemented in Panama.” In reality, hydropower has long supplied the majority of Panama’s electricity. In 2004 hydropower contributed 56% of the country’s installed capacity. The list of “recent hydropower projects in Panama” given in the PDD includes only one hydropower plant commissioned since 1984 and conveniently fails to list AES’s Bayano expansion project, or numerous other hydro projects that are under construction or recently completed. It omits the two other dams for which AES has received concessions on the Changuinola River, the highly controversial Bonyic hydro project, and the 87 hydro projects that have been approved by, or are seeking approval from, Panama’s DNA (CDM authority).

“Barrier due to Project’s Sensitive Location”
This is the one area where the project may indeed be additional. The project is being built in a supposedly protected area and on the lands of an indigenous community which is strongly opposed to the project. This opposition has been manifested in numerous political actions such as the blockading of the road to the construction site in December 2007 and January 2008, as well as a number of domestic and international legal actions (the struggle against the dam is referred to in the PDD only as a “significant discussion”).

One of the more shockingly deceitful claims made by AES in the PDD is that “95% of the population in the region approves the project.” The only evidence given for this claim is a newspaper clipping quoting the leader of an “astroturf” (false grassroots) organization set up and funded by AES to promote their dams and discredit genuine environmental and community organizations. This is typical of the dirty tricks used by AES to promote the dam.

It may be the case that if the Changuinola I dam is registered by the CDM this will give the appearance of UN approval for the project’s “clean” credentials. This could assist AES and the Panamanian government (majority shareholders in AES Panama) to defeat the political and legal challenges to the dam and ensure its completion. This is the only form of additionality – let us call it “greenwash additionality” – for the project which is at all credible.

This “greenwash additionality” is totally unacceptable and contrary to the spirit of the CDM. The CDM is not supposed to help unscrupulous and dishonest developers to steamroller environmentally and socially destructive projects against the wishes of local people or to interfere in ongoing legal processes and petitions. If TÜV-SUD validates this project it will be colluding in the human rights abuses and environmental destruction being caused by Changuinola 1 and the dishonest practices of AES.

The AES PDD claims that the dam “follows the recommendations” of the World Commission on Dams. This is a risible claim. The dam is in breach of numerous essential aspects of the WCD, most importantly perhaps the requirement to gain the “free, prior informed consent” of indigenous people. Clearly AES have paid lip service to the WCD in the hope that this will help ensure that CERs from Changuinola I will be eligible to be used in the European Trading System (which requires WCD compliance).
Proper Consultation and Research

To be legitimate, TÜV-SUD’s validation process must include interviews with stakeholders other than AES and allied groups and the Panamanian government. These stakeholders should include at a minimum Ngobe community leaders, their legal advisors, Panamanian environmental and human rights organizations including ACD, the UN Special Rapporteur on human rights and indigenous people, and members of the UNESCO delegation who visiting the area in January 2008 to assess the request for the La Amistad International Park to be listed as a World Heritage Site in Danger. A validation report based only on discussions with dam supporters would be non-credible and totally unacceptable.

Jeffrey D. Stein, “Resistance to Dam Nation: An Analysis of the Stance and Strategies of the Opposition Movement to the Chan-75 Hydroelectric Project in Bocas del Toro, Panama.” BA thesis, Wesleyan University, Connecticut, April 2008.

Jessica Barber, “Paradigms and Perceptions: A Chronology and Analysis fo the Events of the Chan-75 Hydroelectric Project and the Roles and Relationships of Participants.” SIT Panama: Conservation and Development, May 2008.

The Clean Development Mechanism (CDM) was established under the Kyoto Protocol. It is the most important global carbon trading system. It is intended to lower industrialized countries’ costs of cutting greenhouse gas emissions by allowing them to purchase “carbon credits” that subsidize supposedly low–carbon “sustainable development” projects in developing countries.

International Rivers’ experience in monitoring CDM projects has shown many serious flaws in its theory and application. Project proposal documents are marred by misleading and often patently false claims. International Rivers and others have explained these problems in numerous comments on specific hydro projects submitted during the CDM project approval process.

Many of the projects proposed (and many of those approved) for CDM credits are “non-additional.” This means that they would have taken place without help from sales of carbon credits. The end result is that developed countries are avoiding having to reduce their own emissions by claiming credits for fictitious emission reductions.

The hydropower industry is particularly culpable in cheating the CDM system. By mid-January 2008, 755 hydro projects with an installed capacity of 25,362 MW had applied for credits, almost two-thirds of them in China. International Rivers maintains a spreadsheet with data on hydropower projects in the CDM project pipeline. If the UN body that administers the CDM approves these projects the hydro industry will make billions of dollars from the Northern consumers and taxpayers who will indirectly pay for the credits. Meanwhile the global climate – and the effectiveness and credibility of the Kyoto Protocol – will suffer.

Many observers agree that the supposed “sustainable development” benefits of the CDM have failed to materialize. Only a tiny minority of credits are being purchased from “additional” sustainable energy projects with clear environmental and social benefits.

A European Union law called the Linking Directive regulates the use of CDM credits within the EU’s internal carbon trading system. The directive states that large hydro credits entering the European Trading System must comply with the criteria and guidelines of the World Commission on Dams. To date, none of the large hydros in the CDM pipeline have proven WCD compliance. International Rivers is working to ensure that credits from large hydro projects that cannot prove CDM compliance cannot be used within the European Trading System.